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FIRST LOOK: SHEILA BAIR SAYS TBTF MAY BE OVER — From former FDIC Chairwoman Sheila Bair’s latest FORTUNE column, up this a.m.: “Is ‘too big to fail’ over? Believe it or not, it just might be. … Under its new Dodd-Frank mandate, the FDIC has unveiled an innovative strategy to handle a megabank failure. … In its new plan, the agency will be able to take control of the holding company — and become the new owner. As the temporary owner, it will keep the healthy arms alive in one or more ‘good banks,’ while putting the megabank’s former shareholder and creditor interests into a government-controlled receivership. Losses will be fully absorbed by the holding company’s shareholders and unsecured creditors. Taxpayers will not be at risk of loss.”

FIRST LOOK II: PRIVATE EQUITY AND PENSIONS — The Private Equity Growth Capital Council (PEGCC) today will release a whitepaper submitted to House Ways and Means that “highlights the significant amount of capital pension funds committed to private equity and the financial gains they receive from the outperformance of these investments.” White paper: http://bit.ly/12Mqntr

FIRST LOOK III: BUSINESS ROUNDTABLE ON DERIVATIVES — Business Roundtable is sending a letter to the White House in response to a request from President Obama for ideas on how to better streamline regulation. From the letter, written by Eaton Corp CEO Sandy Cutler, who chairs BRT’s corporate governance committee:

“One serious example I want to bring to your attention concerns the implementation of the derivatives title of the Dodd-Frank Act. …

Our concern is that derivatives trades entered into by end-users … do not contribute to systemic risk. Over-regulating trades by end-users would succeed only in reducing such trades, which means that end-users would manage their risk less effectively without any measurable benefit to the economy as a whole” Full letter: http://bit.ly/ZbpR8s

DIMON CALLS WHALE TRADE STUPID AND EMBARRASSING — Per JPMorgan CEO Jamie Dimon’s latest letter to shareholders ahead of the bank’s first quarter earnings on Friday: “It’s impossible to look back on the past year and not talk about the London Whale. Let me be direct: The London Whale was the stupidest and most embarrassing situation I have ever been a part of. But it is critical that we learn from the experience — otherwise, it truly was nothing but a loss. I also want our shareholders to know that I take personal responsibility for what happened. I deeply apologize to you, our shareholders, and to others, including our regulators, who were affected by this mistake.”

FALLOUT — Dimon on actions taken: “We replaced the management team responsible for the losses, we invoked comprehensive clawbacks of previously granted awards and/or repayment of previously vested awards for those with primary responsibility (more than $100 million was recaptured), we reduced or eliminated compensation for a group of employees, and your Chief Executive Officer and Chief Financial Officer saw their compensation reduced by the Board as a result of this embarrassing episode.” http://bit.ly/ZiChZ0

THIS MORNING ON POLITICO PRO FINANCE— Jon Prior on the FHA budget shortfall … Items on Sen. Warren and Rep. Cummings pressing regulators for more foreclosure details and a full roundup of budget day … To learn more about Pro's subscriber-only coverage -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or info@politicopro.com.

DRIVING THE DAY – President Obama this morning meets at the White House with members of the Financial Services Forum, which represents the nation’s largest banks. The White House visit comes as part of the group’s Spring Meeting. Guests will include BofA’s Brian Moynihan and JPMorganChase’s Jamie Dimon, among others, to discuss the economy and fiscal issues. The debt ceiling, and avoiding a summer meltdown, is likely to come up as a key topic … Obama holds a conference call this afternoon on increasing youth employment … Initial jobless claims at 8:30 a.m. expected to drop to 360K from last week’s big spike to 385K. If the number doesn’t drop significantly, well, Houston we have a problem … Import prices at 8:30 a.m. expected to dip 0.5 percent …

OOPS! FED LEAKS MINUTES EARLY — FT’s Robin Harding in Washington and Tom Braithwaite and Stephen Foley in New York: “The Fed … leaked the minutes of its last rate-setting meeting to bank lobbyists as well as congressional aides and trade associations. On Wednesday the Fed published its March minutes in the morning rather than the afternoon as had been scheduled. The central bank said it was doing so because they had already been accidentally released on Tuesday afternoon to a distribution list, comprising ‘mostly congressional staffers and trade association members in Washington’. … [O]n Wednesday afternoon, the Fed published that list, which included lobbyists at Goldman Sachs,JPMorgan Chase and Citigroup, among other banks.

“Though the list was predominantly comprised of staffers to members of Congress, it also included a significant number of employees working for banks, opening the possibility that they could have passed on the information to traders. Staff at Fifth Third, Barclays, Regions Financial, Wells Fargo, Citi, UBS, US Bancorp, Goldman, JPMorgan and PNC Financial all received the minutes early. Naomi Camper, one of … The potential damage may have been limited by the fact that the minutes contained no explosive revelations.” http://on.ft.com/10V12e1

OBAMA BUDGET FLY-AROUND –

TOP TAKE-AWAYS – POLITICO’s Jonathan Allen: “Obama’s top priority isn’t a grand bargain … The White House has presented the budget as a final offer on deficit reduction, but it’s the same one Republicans rejected last December. … The president’s trying to send the message that he’s the one who offered a ‘compromise,’ as he said in the Rose Garden roll out Wednesday, and that it’s Republicans who are uncompromising.

… Perhaps the best way to view Obama’s budget is in the context of the charm offensive he’s launched on Capitol Hill. While the budget might not lead to a deficit deal, it helps maintain the more cooperative environment Obama has been cultivating this year.

“It was largely free of the kind of major new initiatives that fuel partisan warfare, and it didn’t take the issues he might be able to get something done on — gun-control and immigration reform — out of the news. … And there’s even a sweetener or two buried in its pages. Obama offered up Ways and Means Committee Chairman Dave Camp’s mark to market financial derivatives [taxation] plan as part of his own tax reform proposal, for example.” http://bit.ly/16TdMoG

OBAMA TAKES A GAMBLE — WSJ’s Damian Paletta: “Obama took a political gamble … by proposing to curb the growth of Social Security and Medicare, hopeful that the concessions would draw rank-and-file Senate Republicans into a budget deal that has so far proven elusive. The offer came in the White House's $3.778 trillion spending plan for the year that begins in October, which called for about $1 trillion in tax increases over 10 years and higher spending on programs such as education, transportation and mental-health services. Congressional Republican leaders mostly dismissed the package and described it as a nonstarter because of proposed tax increases. … House Republicans and Senate Democrats already have passed budget resolutions, meaning the long-delayed White House proposal can be viewed as a political document aimed at influencing deficit-reduction discussions.” http://on.wsj.com/10XiYXO

THE RIFT — NYT’s Jackie Calmes: “Obama’s new budget has opened a debate over what it means to be a progressive Democrat in an age of austerity and defines him as a president willing to take on the two pillars of his party — Medicare and Social Security — created by Democratic presidents. By his gamble … Mr. Obama has provoked angry supporters on his left to ask whether he is a progressive at all.

The A.F.L.-C.I.O. president, Richard Trumka, in a blistering statement, called the proposed changes ‘wrong and indefensible.’ … But to Mr. Obama, cost-saving changes in the nation’s fastest-growing domestic programs are more progressive than simply allowing the entitlement programs for older Americans to overwhelm the rest of the budget in future years. …

“The president’s views put him at the head of a small but growing faction of liberals and moderate Democrats who began arguing several years ago that unless the party agrees to changes in the entitlement benefit programs … the programs’ costs will overwhelm all other domestic spending to help the poor, the working class and children. … Representative Nancy Pelosi of California, the Democratic minority leader, has arranged for House Democrats on Thursday to hear a debate on Mr. Obama’s proposed change in the cost-of-living formula that determines Social Security benefits.” http://nyti.ms/ZO7x0Q

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BUDGET FANTASY? — POLITICO’s David Nather: “Just like most budget proposals, which reflect the world as their authors would like to see it, Obama’s $3.78 trillion proposal relies on a few tricks to make the numbers work. … In Obama’s case, he wishes the sequester didn’t happen, so — poof — the sequester is gone. That’s the underlying assumption of Obama’s package. It suggests that he and Republicans could agree to replace it with his package of entitlement reforms and tax increases. … The problem, of course, is that Republicans aren’t sweating the sequester right now, and there’s little incentive for them to consider more tax increases unless public pressure builds more than it has so far. …

“Another favorite budget trick: count savings from cuts that Congress will never approve. Obama’s proposing a $452 million cut to [LIHEAP] … He also wants to cut $472 million, compared to his last budget, for EPA's state revolving loan funds for wastewater and drinking water. He can try, but neither cut is very likely in this Congress … Obama's budget doesn't just assume the president and Congress can reach a deal on the sequester — it uses months-old economic forecasts that assume the sequester would have been replaced by now.” http://bit.ly/10UYFrv

SURPRISE! WALDEN RIPS OBAMA ON CHAINED CPI — NRCC Chair Greg Walden (R-Ore.) surprised many in both parties with his comments on CNN that Obama was “trying to balance this budget on the backs of seniors” with his chained CPI proposal. It came as a particular shock to some Republicans given the party leadership’s support for the change and the 104 House Republicans that backed it as part of the Republican Study Committee budget. Flashback: Boehner supports chained CPI: http://politi.co/ZiuScf

TBTF FLY-AROUND –

DON’T BREAK ‘EM UP I — Heritage Foundation’s James L. Gattuso: “The argument is temptingly simple, but it is flawed. Limiting the size of banks would do little to prevent future bailouts while doing much to damage the financial system and the U.S. economy. Too-big-to-fail policies should be ended, but a forced breakup of big banks is the wrong way to do it. … Large banking firms such as Citigroup, JP Morgan Chase, Bank of America, and Wells Fargo serve a critical role in the financial ecosystem. Operating on a global scale, they are especially important to U.S. firms operating worldwide.” http://goo.gl/jOoRL

DON’T BREAK ‘EM UP II — Per Goldman Sachs report on Brown-Vitter draft: “We estimate that such a bill would increase the amount of required equity in the US banking system by $1.1 trillion, which would drive ROEs down to 5 percent (from 11 percent). We believe banks would likely have difficulty raising this amount and our analysis suggests it could reduce lending capacity by an estimated $3.8 trillion, or 25 percent of today’s level …

“In our view [Brown/Vitter] would incent the largest banks to break up or to de-lever considerably, which would be challenging as: (1) splitting up would reduce their earnings diversity and create funding challenges, and (2) even if they de-levered below $400 billion, they would still need to double their capital from current levels to comply”

COMING TMRW: JPMORGAN EARNINGS — Per KBW report: “JPM set to report earnings before the market opens on Friday, April 12. We expect JPM to report EPS of $1.33, and this is below consensus of $1.39 per share. … While much attention is paid to trading, investment banking, and net interest income, the company’s asset management business quietly chugs along as the second-largest component of total revenues (15 percent in 2012). With the surge in equity values and money coming off the sidelines, one of our focal points will be on this line item as it is more sustainable than the below-normal loan loss provisioning level.”

BANKS SHIFTING RISK — NYT’s Susanne Craig: “Banks have been shedding risky assets to show regulators that they are not as vulnerable as they were during the financial crisis. In some cases, however, the assets don’t actually move — the bank just shifts the risk to another institution. This trading sleight of hand has been around Wall Street for a while. But as regulators press for banks to be safer, demand for these maneuvers — known as capital relief trades or regulatory capital trades — has been growing …

Citigroup, Credit Suisse and UBS have recently completed such trades. Rather than selling the assets, potentially at a loss, the banks transfer a slice of the risk associated with the assets, usually loans.

“The buyers are typically hedge funds, whose investors are often pensions that manage the life savings of schoolteachers and city workers. The buyers agree to cover a percentage of losses on these assets for a fee, sometimes 15 percent a year or more.

The loans then look less worrisome — at least to the bank and its regulator. As a result, the bank does not need to hold as much capital, potentially improving profitability. …

Citigroup, Credit Suisse and UBS declined to comment on their trades. Privately, however, bankers acknowledge that while these trades may be pushing risk into a less regulated corner of Wall Street, they also point out that the risk is being moved into a less systemic part of the financial industry than the big banks.” http://nyti.ms/10UJVKT

GOLDMAN BEATS BALLOT MEASURE TO SPLIT CHAIR/CEO — FT’s Tom Braithwaite: “Lloyd Blankfein will avoid a vote on his future as chairman of Goldman Sachs after cutting a deal with investors but Jamie Dimon, his counterpart at JPMorgan Chase, will not get off so easily. At Goldman’s annual meeting in Salt Lake City next month, there will be no referendum on whether to strip Mr Blankfein of one of his combined chief executive and chairman role.

“The Change to Win Investment Group, which advises union pension funds, has agreed to withdraw its motion after Goldman agreed to bolster the role of James Schiro, its lead director. … Goldman’s concessions included enhancing the role of Mr Schiro by allowing him to write directly to shareholders, set the board agenda and hold more board meetings for only outside directors” http://on.ft.com/16TwCMq